United States District Court, S.D. Ohio, Western Division
AND ENTRY SUSTAINING DEFENDANTS NAVISTAR INTERNATIONAL
CORPORATION, NAVISTAR FINANCIAL CORPORATION AND INDIANAPOLIS
CASTING CORPORATION'S MOTION TO DISMISS
INTERVENOR-PLAINTIFF SUPPLEMENTAL BENEFIT COMMITTEE OF THE
NAVISTAR, INC., RETIREE SUPPLEMENTAL BENEFIT PROGRAM'S
COMPLAINT FOR ENFORCEMENT OF SETTLEMENT AGREEMENT (DOC.
#498); INTERVENOR-PLAINTIFF'S COMPLAINT (DOC. #491) IS
DISMISSED WITH PREJUDICE; JUDGMENT SHALL ENTER IN FAVOR OF
DEFENDANTS AND AGAINST INTERVENOR-PLAINTIFF; CAPTIONED CAUSE
H. RICE UNITED STATES DISTRICT JUDGE
Supplemental Benefit Committee of the Navistar, Inc., Retiree
Supplemental Benefit Program ("Intervenor-Plaintiff'
or "the SBC"), purports to represent retirees who
are participants in the Navistar, Inc., Retiree Health
Benefit and Life Insurance Plan (the "Health Plan"
or "Base Plan"), and has filed a Complaint to
Enforce Settlement Agreement ("Complaint"). Doc.
#491. The Base Plan was established by a
Settlement Agreement that is discussed in greater detail
below, and is governed by the Employee Retirement Income
Security Act of 1974 ("ERISA"), 29 U.S.C. §
1001 et seq., and provides prescription drug
benefits to participants. Doc. #491, ¶¶ 1-2, PAGEID
#3158-59. The SBC alleges that, beginning in 2012, Defendants
Navistar International Corporation ("Navistar" or
the "Company"), Navistar Financial Corporation and
Indianapolis Casting Corporation (collectively
"Defendants") began misappropriating subsidies paid
to Navistar, as the Base Plan's Administrator and Named
Fiduciary, by the Center for Medicare and Medicaid Services
("CMS"). The SBC alleges that Navistar distributed
the subsidies solely to Defendants, rather than using a
portion of the subsidies to lower the amount of retiree
contributions to the Base Plan. Id., ¶ 3,
PAGEID #3159. The SBC argues that, by misappropriating the
subsidies, Defendants have breached the Settlement Agreement.
Id., ¶¶ 61-62, PAGEID #3172-73.
have filed a Motion to Dismiss Intervenor-Plaintiffs'
Complaint for Enforcement of Settlement Agreement
("Motion"), arguing that the SBC lacks standing to
enforce the terms of the Base Plan. Doc. #498. For the
reasons set forth below, their Motion is SUSTAINED.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
28, 1992, Defendants "announced major reductions in the
insurance and health benefits offered to the company's
retired employees and their dependents." Doc. #446,
PAGEID #2170 (citation omitted). A group of retirees led by
an Art Shy ("Shy plaintiffs") filed suit
against Defendants, and a Settlement Agreement was reached on
May 27, 1993. Id. The Settlement Agreement,
incorporated by the Court as a consent decree, established
the Base Plan, under which Defendants and the retirees (or
"participants") were required to make annual
contributions to the Navistar International Transportation
Corporation Retiree Health Benefit Trust (the
"Trust"); the "Trust then pays for the
participants' health benefits, including prescription
drug costs." Doc. #491, ¶ 3, PAGEID #3159. The
Settlement Agreement required Defendants and Plan
participants to make periodic contributions to the Trust as
part of the Base Plan's cost-sharing requirement.
Id., ¶ 20, PAGEID #3162-63. Navistar became the
Base Plan's Administrator and Named Fiduciary,
"subject to the review authority of the Health Benefit
Program Committee [('HBPC').]" Doc. #498-1,
§ 1.5, PAGEID #3249-50.
Settlement Agreement also created the Navistar, Inc. Retiree
Supplemental Benefit Program ("Supplemental Benefit
Program"), and created the SBC to be the Supplemental
Benefit Program Administrator and Named Fiduciary. Doc.
#498-1, §§ 6.1, 6.2, PAGEID #3329-30. The
Settlement Agreement required Navistar to "cooperate
with the [SBC] and Supplemental Benefit Trust to provide for
the reduction of premiums, co-payments, deductibles and other
amounts which would otherwise be required to be paid by or on
behalf of Enrolled Participants under the [Base Plan.]"
Id., § 6.5(a), PAGEID #3332.
initially, participants' drug benefits were provided
directly by the Base Plan itself, Doc. #491, ¶ 24,
PAGEID #3163, the passage of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 created a
prescription drug benefit ("Medicare Part D")
administered by CMS. Pub. L. 108-173, 117 Stat. 2066.
Effective July 1, 2010, Navistar unilaterally eliminated the
Base Plan's prescription drug benefit for
Medicare-eligible participants (including Plaintiffs), and
required those participants to enroll in Medicare Part D.
Id., ¶26, PAGEID #3164. From July 1, 2010,
through December 31, 2011, Navistar, through the Trust, paid
"fixed monthly premiums for a fully-insured Series 800
Medicare Part D Plan [('Fully-Insured PDP')]."
Id., ¶ 31, PAGEID #3164. Despite decisions and
orders from this Court requiring Navistar to reinstate the
Base Plan's prescription drug benefit, Navistar never did
so, and the Medicare-eligible participants were still
required to obtain prescription drug coverage through the
Fully-Insured PDP. Id., ¶ 28 (citing Doc. #373,
the Fully-Insured PDP, CMS and certain pharmaceutical
manufacturers would remit subsidies intended to offset the
cost of prescription drugs to SilverScript Insurance Company
("SilverScript"), which was the underwriter and
administrator of the Fully-Insured PDP, and which later
became part of CVS Caremark ("Caremark"). Doc.
#491, ¶¶ 31-35, PAGEID #3164-65. In turn,
SilverScript, and later Caremark, used the subsidies "to
reduce the cost of the insurance premiums it charged the 
Trust to provide the drug benefit." Id., ¶
36, PAGEID#3166. Under the Fully-Insured PDP, then, both
Plan participants and Defendants, as contributors to the
Trust, had their out-of-pocket costs for the prescription
drug benefit reduced through the subsidies.
Navistar, as Base Plan fiduciary, subsequently amended its
contract with Caremark, and effective January 1, 2012, the
"Trust assumed the liability for paying the underlying
prescription drug claims (the 'Self-Funded
PDP')." Doc. #491, ¶ 37, PAGEID #3166. Because
the Trust became the payor of the claims, CMS and the
pharmaceutical manufacturers paid the subsidies directly to
Navistar. Id., ¶ 38. However, Navistar did not
use the subsidies to lower the premiums paid by the Base Plan
participants. Rather, Navistar distributed the subsidies to
the Defendants, in essence, "using the Participants'
share of the Subsidies to reduce their own obligation to make
contributions to the . . . Trust." Id., ¶
40, PAGEID #3167. The SBC claims that, from January 1, 2012
through April 2015, Defendants misappropriated approximately
$26 million in subsidies that should have been passed on to
the participants. Id., ¶ 41.
administration of the Base Plan has been subject to prior
litigation in this Court. On June 4, 2010, Navistar (and the
other Defendants in this case) filed a complaint against,
among other persons and entities, the SBC. Case No.
3:10-cv-211, Doc. #1. In the complaint, Navistar alleged that
it contributed shares of stock to the Supplemental Benefit
Trust, which the SBC sold, id., ¶¶ 39-40,
PAGEID #11, and used the proceeds therefrom to fund
"comprehensive dental coverage, a comprehensive vision
program, and hearing aid coverage." Id., ¶
38, PAGEID #10. Navistar claimed that the SBC and others were
preventing Navistar from obtaining the permanent and definite
reduction in its accumulated postretirement benefit
obligation ("APBO"). That reduction in its ABPO,
Navistar alleged, was the "benefit of the bargain"
it was supposed to obtain from the Settlement Agreement.
Id., ¶ 77, PAGEID #17-18. Navistar sought a
declaratory judgment capping its APBO or, in the alternative,
rescinding or modifying the Settlement Agreement.
Id., ¶¶ 87-119, PAGEID #20-26. A motion to
dismiss was filed, Case No. 3:10-cv-211, Doc. #21, but before
the Court could rule on the motion, Navistar dismissed the
lawsuit. Case No. 3:10-cv-211, Doc. #22, PAGEID #663 (citing
April 26, 2010, several unions and individual Base Plan
participants filed a Motion to Compel Compliance with the
Settlement Agreement, in response to Navistar's decision
to abolish the Base Plan's prescription drug benefit and
create the Fully-Funded PDP. Doc. #343. On February 24,
2011, the Court sustained in part and overruled in part that
motion, declaring "that Navistar was without authority
to unilaterally substitute [the Fully-Funded PDP] for the
prescription drug benefit adopted by the parties in
accordance with the Settlement Agreement!, ]" but
overruled the motion "to the extent that the
[Plaintiffs] seek injunctive relief." Doc. #373, PAGEID
#916. On September 30, 2011, after settlement negotiations
between the retirees and Defendants failed, the Court ordered
"Navistar to reinstate, on an immediate basis, the
prescription drug benefit that was in effect before Navistar
unilaterally substituted Medicare Part D for that
benefit." Doc. #383, PAGEID #1000. Navistar was also
ordered to reimburse the participants for any increased
premiums they had paid from July 1, 2010, until that date.
March 26, 2012, the SBC moved to intervene to enforce the
Settlement Agreement, claiming that Navistar "failed to
meet their [sic] obligations under the [Settlement
[A]greement, with respect to the [SBC]." Doc. #395,
PAGEID #1107, amended at Doc. #407. On February 6,
2013, the Court allowed the SBC to intervene, Doc. #414, and
on February 15, 2013, the SBC filed a formal complaint to
enforce the Settlement Agreement, Doc. #415, which Navistar
subsequently moved to dismiss. Doc. #422. On March 29, 2013,
the Court sustained the SBC's motion to enforce the
Settlement Agreement. Doc. #426, vacated and remanded,
Shy v. Navistar Int'l Corp., 781 F.3d 820 (6th Cir.
2015). In so doing, the Court held that the SBC had standing
to enforce the Supplemental Benefit Trust Profit Sharing Plan
("PSP"), as the "SBC is a creation of the
[Supplemental] Plan itself, with the express purpose and duty
of enforcing the terms of the Supplemental Plan and the
PSP." Id., PAGEID #1964.
the Settlement Agreement named both the SBC and Navistar as
Program Administrator and Named Fiduciary for the
Supplemental Benefit Program. Id., PAGEID #1965
(citation omitted). The SBC's status as a fiduciary, the
Court noted, allowed the SBC to enforce the terms of the
Supplemental Plan. Id. (citing 29 U.S.C.
§§ 1002(21)(A), 1132). This Court, in so holding,
concluded that the SBC's "dispute over what
information Navistar had to provide under the Plan was not
subject to the alternative dispute resolution
procedures" set forth in the settlement agreement.
Shy, 781 F.3d at 824. The Sixth Circuit, however,
held that because "[i]n each claim[, ] the SBC is
disputing information or calculations regarding
Navistar's obligations to the Supplemental Benefit Trust
that Navistar provided under its reporting obligations under
the [Settlement [A]greement. This places each claim within
the scope of the arbitration clause." Id. at